Dell Reports Fourth Quarter, Full Fiscal Year Financial Results

Revenue of $14.3 billion in fourth quarter, $56.9 billion for the year

GAAP earnings of $0.30 per share in quarter, $1.35 per share for full year; non-GAAP earnings of $0.40 per share in quarter and $1.72 per share for full year

Cash flow from operations of $1.4 billion; $3.3 billion for fiscal year

Dell announced fiscal 2013 fourth quarter and full-year results today, with revenue of $14.3 billion for the quarter and $56.9 billion for the year. Revenue from enterprise solutions and services grew 6 percent in the quarter to $5.2 billion and was $19.4 billion, or 34 percent of Dell revenue for the fiscal year, a 4 percent gain over fiscal year 2012.

“We continued to execute our long-term strategy in Q4, and realized a 6 percent increase in our enterprise solutions and services business,” said Brian Gladden, Dell CFO. “We also continued to generate strong cash flow from operations of $1.4 billion in the quarter. Our strong balance sheet and cash position enabled the company to invest almost $5 billion in new capabilities and intellectual property this fiscal year, including great assets like Quest, SonicWall, Wyse and AppAssure.”

Results

Revenue in the quarter was $14.3 billion, an 11 percent decrease from the previous year, and a 4 percent increase sequentially. Revenue for the 2013 fiscal year was $56.9 billion, an 8 percent decrease. Dell’s fiscal year 2012 had an extra week, which was incorporated into the company’s Q4 results.

GAAPoperating income for the quarter was $698 million, or 4.9 percent of revenue. Non-GAAP operating income was $954 million, or 6.7 percent of revenue. Gross margins for the quarter benefitted by approximately $250 million, primarily resulting from vendor settlements. For the fiscal year, GAAP operating income was $3 billion and non-GAAP operating income was $4 billion.

GAAP earnings per share in the quarter was 30 cents, down 30 percent from the previous year; non-GAAP EPS was 40 cents, down 22 percent. For the fiscal year, GAAP EPS was $1.35, down 28 percent year over year and non-GAAP EPS was $1.72, down 19 percent.

Cash flow from operations in the quarter was $1.4 billion, and Dell ended Q4 with $15.3 billion in cash and investments. Full-year cash flow from operations was $3.3 billion.

Fiscal-Year 2013 Fourth Quarter and Full Year Highlights Fourth Quarter Fiscal Year

(in millions)

FY13

FY12

Change

FY13

FY12

Change

Revenue

$14,314

$16,031

(11%)

$56,940

$62,071

(8%)

Operating Income (GAAP)

$698

$931

(25%)

$3,012

$4,431

(32%)

Net Income (GAAP)

$530

$764

(31%)

$2,372

$3,492

(32%)

EPS (GAAP)

$0.30

$0.43

(30%)

$1.35

$1.88

(28%)

Operating Income (non-GAAP)

$954

$1,143

(17%)

$3,973

$5,135

(23%)

Net Income (non-GAAP)

$702

$913

(23%)

$3,017

$3,952

(24%)

EPS (non-GAAP)

$0.40

$0.51

(22%)

$1.72

$2.13

(19%)

Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes costs related primarily to the amortization of purchased intangibles, severance and facility-action costs, certain settlement costs and acquisition-related charges. All comparisons in this press release are year over year unless otherwise noted.

Products and Solutions:

Dell server revenueincreased 5 percent driven by strong growth in the company’s hyper-scale data center solutions business and migration to the company’s 12th-generation servers. The 12G-server line now represents almost 80 percent of Dell PowerEdge server revenue at average selling prices and margins that are a premium over previous-generation servers.

Dell networking continued to deliver strong growth, with a 42 percent revenue increase, including more than 100 percent growth in the company’s Force10 business.

Dell Quest software delivered revenue over the company’s stated target of $180-$200 million for the quarter. The company’s security software business also grew sequentially.

Large Enterprise had revenue of $4.7 billionin the quarter, a 7 percent decrease. Operating income for the quarter was $393 million, a 16 percent decrease. Server and networking revenue increased 25 percent and ES&S business grew 10 percent. Revenue for the full year was $17.8 billion, down 5 percent from the previous year.

Public revenue was $3.5 billion, a 9 percent decrease. O perating income for the quarter was $236 million, a 25 percent decrease. Servers and networking revenue grew 11 percent. Revenue for the full year was $14.8 billion, down 8 percent from the previous year.

Small and Medium Business revenue was $3.4 billion, a 5 percent decrease. O perating income for the quarter was $385 million, a 4 percent decrease. SMB enterprise solutions and services sales increased 9 percent for the quarter, driven by servers and networking growth of 13 percent and services revenue growth of 17 percent. Revenue for the full year was $13.4 billion, down 1 percent from the previous year.

Consumer revenue was $2.8 billion, a 24 percent decline for the quarter. Operating income was $8 million, an 87 percent decrease. Revenue for the full year was $10.9 billion, down 20 percent from the previous year.

EMEA revenue decreased 14 percent in the quarter, Americas was down 10 percent, and Asia-Pacific and Japan declined 9 percent.

Company Outlook:

Given the company’s announcement Feb. 5 of a definitive merger agreement to take Dell private, the company is not providing an outlook for its fiscal 2014 or Q1.

About Dell

Dell Inc. (NASDAQ: DELL) listens to customers and delivers worldwide innovative technology, business solutions and services they trust and value. For more information, visit www.dell.com. T he fourth-quarter a nalyst call with Brian Gladden, CFO, and Tom Sweet, Corporate Controller, will be webcast live today at 4 p.m. CST and archived at www.dell.com/investor. To monitor highlighted facts from the analyst call, follow on the Dell Investor Relations Twitter account at: http://twitter.com/dellshares or hashtag #DellEarnings. To communicate directly with Dell, go to www.dell.com/dellshares.

Segment Realignment:In the first quarter of Fiscal 2013, Dell made certain segment realignments in order to conform to the way Dell internally manages segment performance. These realignments affected all of Dell's operating segments, but primarily consisted of the transfer of small office business customers from the Small and Medium Business segment to the Consumer Segment. Dell has recast prior period amounts to provide visibility and comparability. None of these changes impacts Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share.

Non-GAAP Financial Measures:This press release includes information about non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively with non-GAAP gross margin and non-GAAP operating expenses, the “non-GAAP financial measures”), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. In the following tables, Dell has provided a reconciliation of each historical non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading “Reconciliation of Non-GAAP Financial Measures.” Dell encourages investors to review the reconciliation in conjunction with Dell’s presentation of these non-GAAP financial measures.

Special Note on Forward Looking Statements: Statements in this press release that relate to future results and events (including statements about trends relating to macroeconomic challenges, effects of our server business, and government demand) are forward-looking statements and are based on Dell's current expectations. In some cases, you can identify these statements by such forward-looking words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “potential,” “should,” “will” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: intense competition; Dell’s reliance on third-party suppliers for product components, including reliance on several single-sourced or limited-sourced suppliers; Dell’s ability to achieve favorable pricing from its vendors; weak global economic conditions and instability in financial markets; Dell’s ability to manage effectively the change involved in implementing strategic initiatives; successful implementation of Dell’s acquisition strategy; Dell’s cost-efficiency measures; Dell’s ability to effectively manage periodic product and services transitions; Dell’s ability to deliver consistent quality products and services; Dell’s ability to generate substantial non-U.S. net revenue; Dell’s product, customer, and geographic sales mix, and seasonal sales trends; the performance of Dell’s sales channel partners; access to the capital markets by Dell or its customers; weak economic conditions and additional regulation affecting our financial services activities; counterparty default; customer terminations of or pricing changes in services contracts, or Dell’s failure to perform as it anticipates at the time it enters into services contracts; loss of government contracts; Dell’s ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; infrastructure disruptions; cyber-attacks or other data security breaches; Dell’s ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other compliance matters; impairment of portfolio investments; unfavorable results of legal proceedings; Dell’s ability to attract, retain, and motivate key personnel; Dell’s ability to maintain strong internal controls; changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; and other risks and uncertainties discussed in Dell’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its fiscal year ended February 3, 2012. Factors or risks that could cause our actual results to differ materially from the results we anticipate also include: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; (2) the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; (3) the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters delivered pursuant to the merger agreement; (4) risks related to disruption of management’s attention from the Company’s ongoing business operations due to the transaction; and (5) the effect of the announcement of the proposed merger on the Company’s relationships with its customers, operating results and business generally. Dell assumes no obligation to update its forward-looking statements.

Additional Information and Where to Find ItIn connection with the proposed merger transaction, the Company will file with the SEC and furnish to the Company’s stockholders a proxy statement and other relevant documents. These materials do not constitute a solicitation of any vote or approval. Stockholders are urged to read the proxy statement when it becomes available and any other documents to be filed with the SEC in connection with the proposed merger or incorporated by reference in the proxy statement because they will contain important information about the proposed merger.

The directors, executive officers and certain other members of management and employees of the Company may be deemed “participants” in the solicitation of proxies from stockholders of the Company in favor of the proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the stockholders of the Company in connection with the proposed merger will be set forth in the proxy statement and the other relevant documents to be filed with the SEC. You can find information about the Company’s executive officers and directors in its Annual Report on Form 10-K for the fiscal year ended February 3, 2012 and in its definitive proxy statement filed with the SEC on Schedule 14A on May 24, 2012.

Consolidated statements of income, financial position and cash flows and other financial data follow.Dell is a trademark of Dell Inc. Dell disclaims any proprietary interest in the marks and names of others.